The Corporate Citizen – Really?
By Bob Poe
I’m a business guy. I have an undergraduate degree in finance and a master’s degree in business, and I got them in the late 70’s, when there were still relatively few MBA’s running around. I like business, I find it fascinating, I like doing it, I like helping companies be successful. To me business is an endlessly creative experience.
In Alaska, a vital and diversified economy is the key to ours’ and our children’s future here. Our economic growth will come from business. I’m all about helping small and large businesses be successful here in Alaska. The overall benefits businesses yield to the state in terms of jobs and taxes are critical to our economic future. That said the Supreme Court’s recent decision in the Citizens United v. Federal Election Commission case really has me questioning the concept of the corporate citizen.
I’m running for the Democratic nomination for Governor in Alaska. Conventional wisdom says the Court’s decision favors Republicans over Democrats since business decision-makers tend to skew toward the conservative side of politics; I guess as a Democrat I should be personally concerned. But that’s not what’s really bugging me, we’ll work through those campaign fundraising challenges. What is bothering me is the whole direction this concept of attaching individual rights to corporations is taking in our country.
Back in September of 2008, when the American public was told that certain banks, insurance companies, and trading companies were “too big to fail”, I remember wondering aloud, “How did that happen?” Never in my six years of business school did a professor walk us through the “too big to fail” strategy. A fundamental course in a finance degree is an economics course called Money and Banking. The course is about reserve requirements and other regulatory controls placed over banks to assure, as banks leverage their deposits to loans in the community, there are still enough liquid reserves in the bank to meet daily depositor needs. Think back to Jimmy Stewart’s explanation of his savings and loan in “It’s a Wonderful Life”. Obviously, and this has now become clear even in our nation’s capitol, our regulators weren’t regulating.
All of a sudden it became the taxpayer’s responsibility to bail out the big banks and insurance companies. Taxpayers didn’t even get an apology. Now here is where the rub is. Corporations want rights as an individual person when it suits them, and don’t want the personal responsibility when it is inconvenient.
A corporation is treated as an individual for tax purposes since a corporation pays income taxes and the shareholders again pay taxes on the dividend income they receive; hence the oft bemoaned corporate “double taxation”. A corporation can sue and be sued similarly to taking civil court action against another individual. Back in business school all this made pretty good sense to me. But, in the last decade or so corporations began asserting they have First Amendment rights like any person, huh.
Let’s revisit that “too big to fail” strategy. Do any of us think the US taxpayer would be asked to bail out Warren Buffet, Bill Gates, Oprah, or any other billionaire if they had to declare bankruptcy? My bet is we would say, as individuals, they made their investment choices and they have to live with their downside just as they benefit handsomely on the upside. As a business guy I could probably make a plausible argument that the bankruptcy of any of these individuals would have a significant economic impact. But that’s what’s great about America – as an individual you have the freedom to succeed and the freedom to fail.
In his book Unequal Protection – The Rise of Corporate Dominance and the Theft of Human Rights, Thom Hartmann points out the Boston Tea party was actually against landing tea brought into the colonies by the British East India Company, essentially a corporation of the British throne. The crown had given this company specific tax breaks not available to local colonial importers affording the large corporation unfair advantage. He points out during America’s first 100 years, federal and state lawmakers took a wary eye toward the existence of corporations; they had to justify their existence every 30 years. Some states didn’t even allow them access to politicians under penalty of prison. Then in 1886 in the case Santa Clara County v. Southern Pacific Railroad, the Supreme Court concluded corporations did not have personhood, but the court reporter inaccurately represented the decision in the header notes (i.e. a case deciding corporate personhood). Incredibly since then, he argues, courts have upheld as precedent, under stare decisis, corporate rights as an individual that were never actually a precedent.
The above history makes the Supreme’s recent decision in Citizens United v. Federal Election Commission even more amazing because it reverses a decades-long view that corporations could not contribute to candidates or actively spend to affect a political election. What happened to stare decisis here? It is not that corporations are unheard in the political process. Corporations employ the vast majority of lobbyists at the state and federal level. So called “527” groups can mount major political campaigns with few contribution disclosure rules – right now.
This decision is sure to cause real change in the Alaska political process. Alaska Attorney General Daniel Sullivan, at least on first reading, believes corporations will be limited to the $500 per year contribution limit to a candidate, but their opportunities to spend unlimited funds in the category of campaign law called “independent expenditures” is a real game changer.
Recently we have seen independent expenditure battles in Alaska over the Pebble Mine where one of Alaska’s wealthiest residents, Bob Gillam, has contributed individually over $11 million to oppose development of the project. Truth is, there are very few people in Alaska wealthy enough to take on a battle like Mr. Gillam has, it is much more likely a corporation could. Alaska is often a battleground state over issues brought by outside interests. We will no doubt see better funded campaigns around initiatives here due to the Court’s decision – “527” groups have often already played a big role in these types of campaigns.
Perhaps the most chilling aspect of the Court’s ruling is the impact the threat of a corporate-funded independent expenditure campaign may have on the legislature and the Governor. It will be almost impossible for Alaska voters to know whether a politician took a vote, took an action, or signed a bill under the threat of a campaign against them. Threats like these can be made very quietly. And, in light of the very recent taste Veco Corporation left in Alaskans’ mouths; we know the influence corporations, even without their new rights as an individual, can have on the public process.
Maybe it’s time to really ask the question. Are Corporations truly individuals with the same rights of individuals or are they just another form of business organization like the ubiquitous LLC (Limited Liability Company). After all, LLC’s of all sizes are operating all around the country without the double taxation and without the rights as an individual. I for one, even as self-confessed business guy, am starting to really doubt this whole concept of corporate citizen.
Bob Poe has served four Alaska Governors in roles including Commissioner of Administration and Executive Director of Alaska’s largest investment bank AIDEA. He has worked for top international consulting companies including Price Waterhouse and Coopers & Lybrand and has led a variety of Alaska business efforts including attracting the FedEx and UPS cargo hubs to Anchorage, formation of the Alaska Heart Institute and most recently the Pegasus Aircraft Maintenance sale to NANA Development Corporation. He is currently seeking the Democratic nomination for Alaska Governor.
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